OT: State of Michigan Approves Bonds for New Hockey Arena
The state approved $450 million in bonds for the new Red Wings arena in Detroit today. Seems like the project is going ahead even with the bankruptcy.
Edit: Title changed to prevent massive heart attacks
I know you labeled it OT but damn if I didn't think this meant U-M was going to replace Yost, and I was like "in before the meltdown."
Didn't event think of that. Title changed to keep people's heads from exploding.
One empty stadium wasn't enough for them?
That's fantastic. I might actually be enticed to spend some time downtown in a few years. (Not because of soccer, but just the fact that it might be a nice downtown area when they are done)
The Verizon Center in DC completely changed the surrounding neighborhood, as did the ballpark built for the Nationals.
but it certainly won't look good from the outside that the state approved $450MM in bonds when the state's flagship city is bankrupt
Public funding of sports arenas is almost always an unsound financial decision from a CBA perspective. The staples center is the rare exception, but that's because it houses two basketball teams and a hockey team.
Well, it's kind of galling that the state is going to give a billionaire money he doesn't need for a project that probably doesn't isn't a net benefit when Detroit is going bankrupt. Sort of the icing on a really shitty cake.
Do you have any evidence that this will be a "big gain" for Detroit?
There has to be a reason, but it isn't necessarily a good one.
Most new pro sports stadiums are publicly funded, despite the mountain of economic research showing it's dumb. Richard Daley was claiming that hosting the 2016 Olympics would be great for Chicago when that wasn't supported by any independent studies. The people who want this to happen are very powerful and they're getting their way. I'm not particularly comforted by your logic that it must be a good idea because some bad ideas denied.
This plan funding isn't just to build a new arena, but also to revamp the area to bring in more businesses. That hopefully leads to the perception of a safe and fun environment. That would bring in a lot of younger people, which drives up housing prices and increases the tax base.
Detroit has no assets that are going to attract people to live in the city. Unless they change that, there is no hope of turning the city around.
I don't know that it will be a big gain for anybody, I was merely speculating on why this got passed. You seem convinced it's a dumb idea without any evidence other than "other publicly funded arenas have been dumb ideas" and I'm throwing out reasons why this could be different.
As for your last sentence, when did I say this "must" be a good idea, or even suggested that? Or use any logic near what you're suggesting? What I'm asserting is that someone thought this was a good idea, and I agree with you that it could simply be powerful people getting what they want. But that's also not necessarily the case, as there are good reasons for the state to be doing this.
That said, I would imagine this is a pretty big gain for Detroit since they get something (a new arena plus the other development that will go with it) without paying for it themselves. I can't see how that's not a pretty big gain for the city.
1) The fact that other publicly funded arenas have been net negative benefits is plenty of reason to oppose this. I think in the face of that evidence, the burden of proof is on the proponents to demonstrate that this is a good idea.
2) I interpreted your comment that "but there has to be a reason this was approved, because projects like theese get denied all the time" as you saying that it was probably a good idea. I apologize if I misinterpreted it.
3) A big gain relative to what? JLA already exists and sells out. Building a new arena helps Illitch make more profit but it won't necessarily bring more revenue to the city, since the relative attendance will probably stay the same. I know there are other facets of the development, but it's incorrect to say that it doesn't cost Detroit anything. There is an opportunity cost, which is the value of the next best forgone option. If there was something that would have helped Detroit more than giving Illitch a bunch of cash to build this development, than this will not represent a big gain.
I agree with you that it's possible (if not likely) that there could be better uses for this money than this particular project. But I do think this will have positive effects on the city since it will keep attendance high (those figures tend to drop over time for aging arenas) and the nearby development will attempt to bring the fans earlier before games and keep them around after games spending money.
This is something that Staples Center did very well. The forum had little around it to attract fans pre-and post-game. The Staples Center now has a lot of bars and restaurants (and now movie theaters, bowling alleys, dance clubs, everything) where Lakers/Clippers/Kings/Sparks(haha) fans can spend their money before and after the game. Hopefully this project will do a good job with that stuff as well, which the city will certainly benefit from.
Explain to me how spending $450 million in public funds in a city that can't pay it's bills has nothing to do with the bankruptcy?
I'm not taking a position for or against the plan but the bankruptcy issue is certainlly relevant.
Again, I'm not saying it's necessarily a bad idea. I'm just defending the fact that I brought the bankruptcy into the conversation. It's something that needs to be addressed when so much public money is going to be spent.
Per this article in Crain's from June, the proposal outlined in the MOU had these bonds being paid as follows:
- Annual DDA tax capture of $12.8 million to not more than $15 million annually, funding that was authorized by the state in December for use on the arena project
- $64.5 million in other DDA tax capture funds
- $11.5 million annually from Olympia as a concession fee.
The structure of the funding will include no general tax revenue from the city of Detroit, according to those who put this proposal together.
I personally love Joe Louis, I don't see a problem with it. It's got character, and unlike most other stadiums it isn't named for a sponsor.
but set one foot inside a modern arena built in the last decade plus and you begin to see why Joe Louis is so woefully out of date and in need of a major overhaul or replacement.
I love Joe Louis too. However, I directly believe the arena despite all of its character is harming the franchise from failing to attract top free agents. A shitty run down arena like JLA gives off the impression that management is run to a similar degree (which is farther from the truth).
The Joe is classic and all, but it's a downright dump. You have to wait 20 minutes standing in line for any bathroom, walking up and down the stairs can give any normal person acrophobia, it's dark and just has the feel of a 1620's dungeon, it's just too old. You're certainly right that it has character but the cons far outweigh the pros plus parking outside is an absolute nightmare.
But I'm also one who enjoys good number crunching. Even though the subjects were here in the worst city ever, this interesting paper has this conclusion:
The estimated value of intangible benefi ts generated by the two facilities in Columbus capitalized into residential housing prices provide a rough bound on the size of the intangible benefi ts that can be expected from other sports facilities. A new state of the art facility integrated in a comprehensive urban redevelopment program and located in the heart of a large city might be expected to generate increases in residential property values in the vicinity of hundreds of millions of dollars within a mile of the facility, if the location, planning, construction, and development is carried out carefully. ... By assessing the impacts of sports facilities on residential housing values, we add to the understanding of the economic benefi ts generated by professional sports facilities and help explain why cities continue to compete to subsidize sports facility construction. In particular, our results suggest that cities continue to subsidize the construction of professional sports facilities despite the lack of evidence that these facilities generate important tangible economic bene fits because the facilities generate important intangible economic bene fits. The presence of a professional sports facility and team, will generate substantial intangible bene fits that are capitalized into housing values and enjoyed by the residents of the community. This has signifi cant policy implications. In most cases, cities compete to attract a professional team or retain their current teams by subsidizing the construction of a new sports facility or the renovation of a current sport facility, not only because of the direct economic impacts but also because of these intangible bene fits. The increased housing values, or households' WTP for it, combined with the other direct economic impacts, may justify the subsidies.
WTP=willingness to pay
It's an interesting paper from a technical point of view, but I have two issues:
1) The authors seem to be asking "why do municipalities/states/counties keep financing these things if the literature has demonstrated there is a net negative tangible benefit." They hypothesize that their are intangible benefits and use the housing value as evidence. Any political economist would point out that when you have a concentrated interest with strong preferences versus a diffuse group with weak preferences that the concentrated interest will win. Basically, the really rich owners can get even more rich and the voters don't care enough to stop them. This is the explanation that makes way more sense to me.
2) One should always use CBA over EIA to make policy recommendations because only a CBA calculates the net benefit. I'm pretty sure you know that since you're clearly a giant nerd (this is a compliment).
Anyways, based on your comments in a previous thread, I don't think you're advocating for this kind of thing. Just adding my two cents.
In remotely related news it looks like Chicago will get some Wrigley updates but no bridge over Clark Street (all team funds $500M). Now there's a neighborhood that doesn't need any help in raising property values.
The Joe was an ugly disaster the day it opened, and it isolated the Wings in a part of downtown Detroit that doesn't have anything else. It's much better to put the Wings in a place where they can work in a synergistic fashion with other activities.
Whether it's a prudent expenditure of public monies is another question entirely.
but WTF ... when your largest city (ya know - the one that essentially provided the economy for the State since the 1930's) declares bankruptcy .... the State itself has a BIG problem. Building shiny structures with NO foundation will collapse - the taxpayers in Michigan better rise up .... politicians seem to be living in this new world order that has no regard for financial practicalities - and if the State is paying that means the taxpayers are paying. What is the State's unemployment rate ? What is the State's growth prospects ?
Wow - I love the Wings & I've only been to the Joe twice ... but someone in Michigan needs to get a grip on reality.
Go Blue!
Do you understand how bonds work? As to the employment rate, do you think this is going to magically or appear or will people be working to build it and the surrounding district? Projects like this and the bridge are going to bring jobs.
I'll spare the political rampage and just say that the amount of money spent on sports, on each and every fucking level from normal person to mayor to congress, is indicitive of what people value...
The creation of a New Arena while bankrupting is the most obvious sign that we will not rebound... this city is done.
jdon